Priceline Travels Road Back to High Hit in Dotcom Era
August 9, 2013 Leave a comment
Updated August 8, 2013, 10:21 p.m. ET
Priceline Travels Road Back to High Hit in Dotcom Era
It has taken more than 14 years, but Priceline.com PCLN +0.67% is about to complete a round trip. Fueled by a strong second-quarter earnings report, the company’s stock is closing in on its dotcom-era high after a wild ride that took it from nearly $1,000 a share down into the single digits—and back. The catalyst for the most recent leg was a jump in summer travel bookings, which helped the online airline and hotel reservation service post a 24% increase in profit to $437 million on Thursday. Revenue jumped 27% to $1.68 billion. Bookings surged 38% in the second quarter, driven by strong demand in Asia and resilient spending in Europe. The performance sent shares toward their all-time high. In after-hours trading, Priceline rose 5.4% to $984.04. The stock, which has climbed 50% since the start of the year, hit $990 in 1999, then fell below $10 after the Internet bubble burst.The improving travel environment is showing up across some of Priceline’s competitors. Orbitz Worldwide Inc.OWW +36.73% reported that its second-quarter revenue rose 12% to $225.8 million, as the volume of travelers booking hotel and vacation packages jumped. Orbitz shares leapt 37% Thursday.
Priceline warned that its larger size would make sales in the current quarter look weaker compared with the earlier half of the summer. The company predicted its sales would rise 23% to 30% this quarter, just meeting analysts’ forecast of 30% growth.
The company also cautioned that unrest in parts of the world like the Middle East and North Africa could derail travel plans in certain regions, though Chief Executive Jeffery Boyd said business this summer looked “really, really steady,” with strong bookings in Europe.
“That doesn’t mean there isn’t still some volatility,” Mr. Boyd said in an interview. “From a destination perspective, I think Egypt and northern Africa are very challenged for well-known reasons.”
Priceline’s profits have grown for years, driven by people searching for hotel rooms, who tend to be its most lucrative customers. Its heavy reliance on the hotel business has long insulated it from a pullback in air travel, which makes up a smaller share of sales.
The company recently completed its $1.8 billion acquisition of leading travel-search aggregator Kayak Software Corp., a deal that gives Priceline a large base of new site traffic.
Website changes at Google Inc. GOOG +0.23% and TripAdvisor Inc. TRIP +2.21%did little to slow Priceline’s growth, which has accelerated over the past year after a slowdown in Europe cut into new bookings. Google and TripAdvisor make money feeding business to booking services like Priceline through advertising links on their websites.
Priceline spent heavily to expand its U.S. presence and improved results largely at the expense of rival Expedia Inc., EXPE +0.20% pressure that Expedia acknowledged when it reported earnings recently.
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